<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 31, 1996.
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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FIRST PACIFIC NETWORKS, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 3577 77-0174188
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation Industrial Identification No.)
or organization) Classification Number)
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871 FOX LANE
SAN JOSE, CALIFORNIA 95131
(408) 943-7600
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
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M. PETER THOMAS
CHIEF EXECUTIVE OFFICER
FIRST PACIFIC NETWORKS, INC.
871 FOX LANE, SAN JOSE, CALIFORNIA 95131
(408) 943-7600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
BRUCE E. SCHAEFFER, ESQ.
GRAY CARY WARE & FREIDENRICH
A PROFESSIONAL CORPORATION
400 HAMILTON AVENUE
PALO ALTO, CA 94301
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) FEE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock ($.001 par value) . . . . . . . . . . . 1,933,092 shares $.61 $1,179,186 $407
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee and
based on the average of the high and low prices of the Common Stock of
First Pacific Networks, Inc. as reported on the Nasdaq SmallCap Market
on October 29, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A),
MAY DETERMINE.
<PAGE>
1,933,092 SHARES
FIRST PACIFIC NETWORKS, INC.
COMMON STOCK
The shares of Common Stock of First Pacific Networks, Inc. ("FPN" or the
"Company") offered by this Prospectus are shares of Common Stock issuable or
potentially issuable upon exercise of warrants to purchase shares of FPN's
Common Stock that may be sold from time to time by or on behalf of certain
warrantholders (the "Selling Stockholders") of the Company described in this
Prospectus under "Selling Stockholders."
The Company initially issued warrants to purchase the Company's Common
Stock to the Company's underwriter (the "Underwriter Warrants") in connection
with its initial public offering. The Underwriter Warrants were subsequently
assigned to certain employees and officers of the underwriting firm. The
Company granted piggyback registration rights in connection with the Underwriter
Warrants. In lieu of exercising such rights in connection with the Company's
registration of shares of its Common Stock issuable upon conversion of its
Series E and Series F Preferred Stock, the holders of the Underwriter Warrants
agreed with the Company to include shares issuable upon exercise of the
Underwriter Warrants as of October 30, 1996, in a separate registration
statement (the "Registration Statement"). The number of shares of the Company's
Common Stock issuable upon exercise of the Underwriter Warrants and the exercise
price therefore are adjusted in the event of issuance of Common Stock or
securities convertible into Common Stock subsequent to their original issuance
in July 1992. The Company has elected to initially register under the
Securities Act a number of shares of Common Stock equal to at least 120% of the
number of shares of Common Stock that would be currently issuable if all the
Underwriter Warrants were exercised as of October 30, 1996, and to register an
additional number of shares of Common Stock if the number of shares of Common
Stock initially registered is insufficient to cover all of the Common Stock
issued or issuable upon exercise of the Underwriter Warrants in accordance with
the terms thereof. In addition the Underwriter Warrants provides the holders of
Underwriters Warrants the right to include in certain registration statements
other restricted securities of the Company held by them. Pursuant to this right
warrants to purchase 57,475 shares (the "Additional Underwriter Warrants") of
the Company' Common Stock, acquired by the holders of the Underwriters Warrants
in connection with private placements of the Company's securities have been
included in this Registration Statement.
The Company issued warrants to purchase 50,000 shares of the Company's
Common Stock to the remaining holder of Series E Preferred Shares in connection
with an agreement to register the Common Stock issuable upon conversion of the
Series E Preferred Shares in a Form S-3 Registration Statement and issued
warrants to purchase 100,000 shares of the Company's Common Stock to a finder as
compensation in connection with the Series F Preferred Share financing. These
warrant agreements also provided for registration rights. Pursuant to these
rights the holders have elected to include the shares issuable upon exercise of
these warrants in this Registration Statement.
The number of shares of Common Stock initially registered and any
additional shares of Common Stock registered are hereinafter collectively
referred to as the "Shares". The Company has agreed to use its best efforts to
cause the registration statement(s) covering the Shares to be declared effective
and to remain effective for up to twelve (12) months. The Company will not
receive any of the proceeds from the sale of the Shares by the Selling
Stockholders.
The Company has been advised by the Selling Stockholders that they intend
to sell all or a portion of the Shares from time to time in the Nasdaq SmallCap
Market, in negotiated transactions or otherwise, and on terms and at prices then
obtainable. The Selling Stockholders and any broker-dealers, agents or
underwriters that participate with the Selling Stockholders in the distribution
of any of the Shares may be deemed to be "underwriters" within the meaning of
the Securities Act, and any commission received by them and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The Company and the Selling
Stockholders have agreed to certain indemnification arrangements. See "Plan of
Distribution."
The Company will bear all costs and expenses incident to the offering and
sale of the Shares to the public, including without limitation, registration,
filing and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company. All discounts or commissions will be
borne by the Selling Stockholders'.
<PAGE>
THE SHARES HAVE NOT BEEN REGISTERED FOR SALE UNDER THE SECURITIES LAWS OF
ANY STATE OR JURISDICTION AS OF THE DATE OF THIS PROSPECTUS. BROKERS OR DEALERS
EFFECTING TRANSACTIONS IN THE SHARES SHOULD CONFIRM THE REGISTRATION OF THE
SHARES UNDER THE SECURITIES LAWS OF THE STATES IN WHICH SUCH TRANSACTIONS OCCUR,
OR THE EXISTENCE OF ANY EXEMPTIONS FROM SUCH REGISTRATION.
The Company's Common Stock is listed on the Nasdaq SmallCap Market. On
October ____, 1996, the last sales price of the Company's Common Stock as
reported on the Nasdaq SmallCap Market was $________.
--------------
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------
The date of this Prospectus is October____, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Regional Offices of the Commission
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60611 and 7 World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of the fees prescribed by the Commission. FPN's Common
Stock is traded on the Nasdaq SmallCap Market. Reports and other information
concerning FPN can also be inspected at the offices of the National Association
of Securities Dealers, Inc., Market Listing Section, 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has also filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information, reference is made to the Registration Statement, copies of
which may be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the fees
prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act are incorporated herein by reference:
1. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A;
2. Form 10-K for the fiscal year ended March 31, 1996; and
3. Form 10-Q for the period ended June 30, 1996.
4. Form 8-K filed on October 31, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the foregoing documents incorporated by reference in this Prospectus (other than
any exhibits thereto). Requests for such documents should be directed to First
Pacific Networks, Inc. at 871 Fox Lane, San Jose, California 95131, Attention:
Chief Financial Officer.
3
<PAGE>
THE COMPANY
First Pacific Networks, Inc. has developed a patented
telecommunications technology that enables telephone, data and video
communications to be transmitted simultaneously over a single wiring system to a
large number of users on a cost-effective basis. The Company's strategy is to
use a combination of strategic alliances with network system integrators,
network infrastructure builders, major communications service and equipment
providers, distributors and licensees as well as direct product sales to
telephone service and cable television operators and utilities worldwide to gain
market penetration of its products.
The Company believes that worldwide market and regulatory developments and
technological advancements are contributing to the increased demand by both the
telephone and cable television industries for telecommunications systems capable
of providing multiple and integrated communications services to their
subscribers at a cost below or competitive with that necessary to build
conventional communication systems. In addition, electric utility companies and
municipalities are seeking to develop systems capable of implementing energy
management programs as well as providing other communication services such as
voice and data. The implementation of these systems requires upgrading of the
broadband networks of the cable television industry and replacement and/or re-
engineering of the switched voice and low-speed data networks operated by the
telephone companies and/or, in certain instances, the deployment of new
distribution networks. The Company believes that its technology can provide a
cost-effective means of implementing such re-engineering. The Company's
technology enables multiple communications services to be provided over upgraded
network distribution systems or new hybrid fiber/coaxial cable (HFC) networks on
an incremental user basis. To implement the Company's strategy, the Company is
adapting and incorporating its core technology and family of products into
systems designed to address specific market applications. The Company's current
marketing activities are targeted primarily to cable telephony systems
internationally and to selected domestic telephone markets, and domestic energy
management applications for utility companies.
The Company is conducting ongoing product development and testing to adapt
its technology and products for specific market requirement applications and
evaluate products under operating conditions and to reduce product costs. To
date, no system wide first or commercial deployments of the Company's technology
have been implemented, although field trials and pilot systems that include
Company products are currently ongoing. Revenues have not been material and the
Company has incurred substantial operating losses.
In July 1992, the Company completed its initial public offering. The
Company was incorporated under the laws of the State of Delaware in 1987. In
August 1988, the Company changed its name to First Pacific Networks, Inc.
The principal executive offices of FPN are currently located at 871 Fox
Lane, San Jose, California 95131 and its telephone number is (408) 943-7600.
RISK FACTORS
THE SECURITIES OFFERED HEREBY INCLUDE A HIGH DEGREE OF RISK, AND
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING FACTORS AND RISK FACTORS IN
CONJUNCTION WITH THE OTHER INFORMATION INCLUDED AND INCORPORATED BY REFERENCE IN
THIS PROSPECTUS BEFORE PURCHASING THE COMMON STOCK OFFERED HEREBY. THIS
PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A
OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF
1934. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK FACTORS SET FORTH BELOW AND
ELSEWHERE IN THIS PROSPECTUS.
NEED FOR ADDITIONAL FUNDS AND NO ASSURANCE OF AVAILABLE FINANCING. The
Company is experiencing negative cash flow from operations and it is expected
that the Company will continue to experience negative cash flow through the end
of fiscal 1997 and potentially thereafter. There can be no assurances that
adequate revenue growth and reduction of operating losses will be achieved, and
even if they are, management may choose to supplement the Company's cash
position.
4
<PAGE>
The Company believes based on its current operating levels that it has
sufficient cash resources at June 30, 1996, together with $1,500,000 and
$3,325,000 raised in private placements in August 1996 and October 1996,
respectively, for operating activities through November 1996, at which time it
will require additional funds from other sources unless and until it obtains
sufficient revenues from product sales or license fees. The Company is
actively seeking additional funding for both near-term and long-term
requirements from private equity or debt financings and from funding by
strategic partners of various operational activities. To the extent the Company
raises additional funding by issuing equity securities or securities convertible
into equity securities ownership dilution to stockholders will result. The
Company may issue an additional series of preferred stock with rights,
preferences or privileges senior to those of the Company's Common Stock.
Pursuant to the approval given by the Company's stockholders at its annual
meeting on September 17, 1996 the Company has filed an amendment to its Restated
Certificate of Incorporation increasing the authorized number of shares of the
Company's Common Stock to 90 million shares. There can be no assurance that
such increase in the authorized shares will be sufficient to fulfill all of the
Company's future financing requirements. The Company does not have any
commitments or arrangements to obtain any funding and there can be no assurance
that any required financing of the Company will be available or if available
will be obtainable on terms favorable to the Company or its stockholders. The
unavailability of any required financing, could prevent or delay the continued
development and marketing of the Company's products, may require curtailment of
the Company's operations and could result in the bankruptcy or insolvency of the
Company.
On May 31, 1996, the Company completed the sale of an aggregate of 5,000
shares of Series E Preferred Stock (the "Series E Preferred Shares") at $1,000
per share or an aggregate purchase price of $5,000,000 (net proceeds of
$4,900,000 after the payment of placement fees) in a private placement. The
Series E Preferred Shares were offered and sold in reliance on Regulation S
promulgated under the Securities Act of 1933. In August 1996, one investor
converted 2,500 shares of the Series E Preferred Shares into 3,138,000 shares of
the Company's Common Stock and in October 1996 the remaining holder converted
750 shares of the Series E Preferred Shares into 1,003,937 shares of the
Company's Common Stock. The remaining holder of Series E Preferred Shares and
the Company have entered into an agreement (the "Series E Agreement") whereby
the Company is obligated to use its best efforts, to effect a "shelf
registration" of the Common Stock issuable upon conversion of the outstanding
Series E Preferred Shares and to keep the registration statement registering
such shares effective for a period of not less than six months in consideration
of the willingness of the holder to forebear conversion of 1,250 Series E
Preferred shares, until the shares issuable upon conversion are registered. A
registration statement was filed with the Commission and became effective in
October, 1996. In connection with the Series E Agreement the Company has
agreed to issue warrants to purchase up to 50,000 shares of Common Stock to
the remaining holder of Series E Preferred Shares (the "Series E Warrants").
The warrants will become exercisable over a three year term and have an
exercise price of $1.52 per share. The shares issuable upon exercise will be
registered pursuant to a separate additional registration statement. When the
Series E Preferred Shares are converted and if the Series E Warrants are
exercised they will result in additional dilution to the stockholders.
On August 27, 1996, the Company completed the sale of an aggregate of 1,500
shares of Series F Preferred Stock (the "Series F Preferred Shares") at $1,000
per share or an aggregate purchase price of $1,500,000 in a private placement.
The Series F Preferred Shares were offered and sold in reliance on the exemption
from registration under the Securities Act set forth in Regulation D under the
Securities Act. In accordance with the subscription agreement between the
Company and the holder of the Series F Preferred Shares the Company is obligated
to use its best efforts to effect a "shelf" registration of the Common Stock
issuable upon conversion of the Series F Preferred Shares and to keep the
registration statement registering such shares effective for up to six months.
A registration statement was filed with the Commission and became effective in
October, 1996. On October 30, 1996 the Company received notification of
conversion of 1,182 shares of Series F Preferred Stock into 2,364,000 shares of
the Company's Common Stock. In connection with the issuance of the Series F
Preferred Shares the Company has agreed to issue warrants to purchase up to
100,000 shares of the Company's Common stock to an individual as finder
compensation (the "Series F Warrants"). The warrants become exercisable over
a three year term and have an exercise price of $1.52 per share. The shares
issuable upon exercise will be registered pursuant to a separate additional
registration statement. When the remaining Series F Preferred Shares are
converted and if the Series F Warrants are exercised they will result in
additional dilution to the stockholders.
5
<PAGE>
On September 26, 1996, the Company entered into stock purchase agreements
with a group of investors for the sale of an aggregate of 3,500 shares of Series
G Preferred Stock (the "Series G Preferred Shares") at $1,000 per share or an
aggregate purchase price of $3,500,000 (net proceeds of $3,325,000) in a private
placement. The sale of the shares closed on October 1 and 2, 1996. The Series
G Preferred Shares were offered and sold in reliance on the exemption from
registration under the Securities Act set forth in Regulation D under the
Securities Act. In accordance with the registration rights agreements between
the Company and the purchasers of the Series G Preferred Shares the Company is
obligated to use its best efforts to effect a "shelf" registration of the Common
Stock issuable upon conversion of the Series G Preferred Shares and to keep the
registration statement registering such shares effective for up to one year. In
connection with the issuance of the Series G Preferred Shares, the Company has
agreed to issue warrants to purchase up to 350,000 shares of the Company's
Common stock to the placement agent (the "Series G Warrants"). The warrants
become exercisable over a three year term and have an exercise price of $1.34
per share. The shares issuable upon conversion of the Series G Preferred Shares
and exercise of the warrants will be registered pursuant to a separate
additional registration statement. Should the Registration Statement not be
declared effective within ninety (90) days from the date of closing of the
Series G Preferred Share financing the Company will incur certain penalties
payable in cash or the Company's Common Stock. When the Series G Preferred
Shares are converted and if the Series G Warrants are exercised they will result
in additional dilution to the stockholders.
The Series E Preferred Shares may be converted into the Company's Common
Stock at a conversion price which is the lower of (i) $3.25, or (ii) 80% of the
average closing bid price for the three trading days prior to the date the
investor gives notice of conversion. The Series E Preferred Shares shall
automatically be converted into the Company's Common Stock, if not previously
converted, on May 31, 1998. The Series E Preferred Shares are entitled to
receive dividends only when and if dividends are declared on the Company's
Common Stock. The Company has the right to redeem outstanding Series E
Preferred Shares under certain circumstances.
The Series F Preferred Shares may be converted into the Company's Common
Stock at a conversion price which is the lower of (i) $1.27, or (ii) 80% of the
average closing bid price for the three trading days prior to the date the
investor gives notice of conversion. The Series F Preferred Shares shall
automatically be converted into the Company's Common Stock, if not previously
converted, on August 27, 1998. The Series F Preferred Shares are entitled to
receive dividends only when and if dividends are declared on the Company's
Common Stock. The Company has the right to redeem outstanding Series F
Preferred Shares under certain circumstances.
The Series G Preferred Shares may be converted into the Company's Common
Stock at a conversion price which is the lower of (i) $1.34, or (ii) 85% of the
average closing bid price for the three trading days prior to the date the
investor gives notice of conversion. The Series G Preferred Shares shall
automatically be converted into the Company's Common Stock, if not previously
converted, on October 1, 1998. The Series G Preferred Shares are entitled to
receive dividends only when and if dividends are declared on the Company's
Common Stock. The Company has the right to redeem outstanding Series G
Preferred Shares under certain circumstances.
The Underwriters Warrants, the Series E Warrants, the Series F Warrants and
the Series G Warrants contain registration rights. The Underwriter Warrants
also contain certain piggyback registration rights. In addition, rights under
the Underwriter Warrants permit the Additional Underwriter Warrants to be
included in registration statements in which the Underwriter Warrants
participate. The Underwriter Warrants are subject to anti-dilution adjustments
based upon equity security transactions subsequent to the Company's initial
public offering and are currently exercisable for 1,438,015 shares of the
Company's Common Stock at an exercise price of $0.50 per share. The Underwriter
Warrants expire in July 1997. The Series E Warrants and Series F Warrants are
currently exercisable for an aggregate 150,000 shares of the Company's Common
Stock at an exercise price of $1.52 per share and expire in August 1999. The
Series G Warrants are exercisable beginning November 16, 1996 into 350,000
shares of the Company's Common Stock at an exercise price of $1.34 per shares
and expire in October 1999. The Additional Underwriter Warrants are currently
exercisable for an aggregate 57,415 shares of the Company's Common Stock at an
exercise price of $1.53 per share and expire in February 1997. If exercised the
aforementioned warrants will result in additional dilution to the stockholders.
6
<PAGE>
CONTINUING OPERATING LOSSES; ACCUMULATED DEFICIT; UNCERTAINTY OF FUTURE
PROFITABILITY. The Company has incurred substantial losses since its inception
and, as of June 30, 1996, had an accumulated deficit of approximately
$131,408,000. The Company has incurred and expects to incur, over the near-
term, additional operating losses and will continue to incur operating losses
until such time as product sales generate sufficient revenues to fund its
operations. The timing of achieving profitability is primarily dependent upon
the continued development and commercial acceptance of the Company's products,
and management's ability to strategically focus the Company. There can be no
assurance as to whether or when achievement of profitable operations will occur.
Numerous factors may materially and unpredictably affect operating results
of the Company including the uncertainties of new product introduction and sales
growth; the timing and extent of field trials of the Company's products and
recognition of license fees. Accordingly, the Company's operating results are
expected to fluctuate from period to period.
RECEIPT BY THE COMPANY OF A GOING CONCERN OPINION FROM ITS INDEPENDENT
ACCOUNTANTS. The report dated May 17, 1996, of Coopers & Lybrand LLP on the
Company's consolidated financial statements for the fiscal year ended March 31,
1996, contains an explanatory paragraph regarding the Company's ability to
continue as a going concern.
LISTING OF THE COMPANY'S COMMON STOCK ON NASDAQ SMALLCAP MARKET. During
1995, the Company received notice from Nasdaq indicating that as a result of the
Company's failure to maintain $4 million of net tangible assets, as required by
the NASD bylaws governing continuance on the Nasdaq National Market, the
Company's Common Stock would be delisted if the required net tangible assets
condition were not satisfied. Subsequently, the NASD moved the Company to the
Nasdaq SmallCap Market commencing August 25, 1995. The NASD bylaws governing
continuance on the Nasdaq SmallCap Market require companies to, among other
things, maintain $1,000,000 of stockholders equity, or $2,000,000 of
stockholders' equity in the event the Company's Common Stock is traded at a bid
price below $1 per share. Should the Company not raise sufficient additional
equity financing it is possible that as a result of fiscal 1997 losses that the
Company could fall below this minimum stockholders' equity requirement. Were
such condition to occur and if (a) no temporary exception was granted by Nasdaq,
and (b) further equity financing or other means of increasing net tangible
assets was not available, the Company's Common Stock would be delisted from the
Nasdaq SmallCap Market. A delisting of the Company from Nasdaq could adversely
affect the value and liquidity of the shares of the Company's Common Stock and
restrict the Company's future ability to raise equity capital.
UNCERTAINLY OF MARKET ACCEPTANCE. The Company's technology and products
relate to an innovative method of providing telecommunications services. Market
acceptance of the Company's technology will depend in large part on the
Company's ability to demonstrate to potential customers and licensees, the
viability, relative cost-effectiveness and other benefits of the Company's
technology compared to competitive solutions or alternative communications
technologies. Many companies have significant investments and vested interests
in existing technologies and, accordingly, may be unwilling to rapidly accept
new communications technologies. Deployment by telephone and cable service
providers and electric utilities, particularly in the United States, may be
prevented or further delayed by regulatory barriers or limitations on new
capital expenditures. The Company believes that the ability to achieve rapid
acceptance of its technology in major telecommunications markets depends on its
establishment of strategic alliances with major equipment suppliers (OEM's),
system integrators and communication service providers as well as the ability to
demonstrate the cost effectiveness and functionality of the Company's products
in a market with evolving requirements.
There can be no assurance that the Company's existing or future products
will be commercially accepted other than as demonstrated by the Company's sales
growth to date. If market acceptance of these products is slower than
anticipated, the Company's product sales and results of operations would be
adversely affected, which may result in continuing losses. In addition, a
slower rate of product commercialization is likely to result in an increased
need for additional outside funding of the Company's operations.
7
<PAGE>
COMPETITION. Many areas of the telecommunications industry are
characterized by intense competition, with a large number of companies offering
or seeking to develop technology or system capabilities similar to those of the
Company's technology or products. Many of these companies have substantially
greater financial, marketing and other resources than the Company, are
significantly more established in the industry and have substantial investments
in their technology. The Company's competitors include manufacturers and
vendors of technology and products which address specific customer or market
needs for each discrete area of the telecommunications industry. The Company
also competes directly with many companies who are developing or who are forming
alliances with companies in the communications field to develop innovative
communications technologies. In certain markets, the Company will also be
indirectly competing with companies who are also potential customers of its
technology and products, such as original equipment manufacturers. There can be
no assurance that competitors will not succeed in developing technologies or
offering products that are marketed at a lower price than those of the Company
or in obtaining market acceptance for products more rapidly than the Company.
Continued deregulation of the domestic telephone and cable television
industries, as well as the emergence of new telecommunications technologies, can
be expected to result in increased competition.
TECHNOLOGICAL CHANGES; RISK OF PRODUCT OBSOLESCENCE. The market for the
Company's technology and products is characterized by rapidly changing
technology and evolving industry standards. Although the Company believes its
approach to telecommunications requirements to be innovative, current
competitors or market entrants may develop new technologies, products, or
standards which could adversely affect the Company's ability to compete
effectively or which could render the Company's technology and products
obsolete. The Company's success will depend on its ability to anticipate
changes in technology and industry standards and to respond to market and
technological developments on a timely basis.
RELIANCE ON CORPORATE RELATIONSHIPS. From time to time, the Company has
established corporate relationships and intends to enter into future corporate
relationships to test, distribute and market its products. Continued
participation by corporate partners under marketing, distribution and supply
agreements with the Company will depend not only on the timely achievement of
development and marketing objectives by the Company, which cannot be assured,
but also on each corporate partner's own financial, competitive, marketing and
strategic considerations. The Company's agreements with strategic marketing,
distribution and supply partners are generally terminable by their corporate
partners on short notice. Suspension or termination of agreements with certain
corporate partners could have a material adverse affect on the Company.
DEPENDENCE ON SUPPLIERS. The Company relies on outside sources to
manufacture components of its products, none of which are contractually
obligated to meet the long-term requirements of the Company. While the Company
believes there are a number of potential sources of supply for each component,
there can be no assurance that current or alternative sources will be able to
supply all of the Company's demands on a timely basis. Although the Company
believes alternative sources are available, any interruption in the supply by
these suppliers or substitution of an alternative supplier would likely result
in a delays in delivery that could adversely affect the Company's business. In
addition, reliance on outside manufacturing sources reduces the Company's
control over production costs.
RELIANCE ON THIRD PARTY MANUFACTURERS. The Companies strategy includes
seeking subcontracts with high volume manufacturers in order to provide the
capacity necessary to support projected demands for the Company's products
without incurring the capital expenditures required in connection with
establishing an internal manufacturing capability. The Company may also seek to
cross-license the manufacture of certain elements of its systems to strategic
alliances when such activity could result in enhancements or cost reductions to
its products being funded by the licensee. There can be no assurance that the
Company will be able to secure subcontract manufacturing. Should it not be able
to do so and significant sales materialize, the Company will incur significant
expenditures in building manufacturing capacity and could experience delays in
fulfilling it's production obligations.
8
<PAGE>
In January 1994, the Company entered into a three-year agreement with Sanyo
Electric Co. Ltd. ("Sanyo") providing for Sanyo to manufacture the customer
interface unit of the FPN1000 system. Sanyo commenced initial manufacturing of
the customer interface unit during the fourth quarter of fiscal 1995. The
Company has outstanding non cancelable commitments with Sanyo to purchase
approximately $2.0 million of customer interface units. The Company and Sanyo
currently have agreed that the Company will purchase this inventory which is
comprised of both finished goods and components through the remainder of fiscal
1997.
RISKS OF INTERNATIONAL OPERATIONS. The Company's strategy includes
marketing its technology to licensees and partners, which may include
governmental entities, and selling products in foreign countries. In addition,
a substantial portion of the components of the Company's products are fabricated
overseas. Accordingly, the Company's business will be subject to many of the
risks of international operations, including tariffs and other trade barriers,
currency control regulations, political instability, unexpected changes in
regulatory requirements, difficulties in staffing and managing foreign
operations, longer payment cycles, greater difficulty in accounts receivable
collection and potential adverse tax consequences. Also, currency conversion
gains and losses could contribute to fluctuations in the Company's results of
operations. If for any reason exchange or price controls or other restrictions
on the conversion or repatriation of foreign currencies were imposed, the
Company's operating results could be adversely affected. There can be no
assurance that these factors will not have an adverse impact on the Company's
international operations and, consequently, its operating results.
DEPENDENCE ON LICENSEES AND INDEPENDENT DISTRIBUTORS. To the extent the
Company licenses its technology, revenues beyond the initial license fee will be
derived primarily from product component sales to or royalties from licensees or
other revenue-sharing arrangements which are dependent on the successful
marketing of products utilizing Company technology. Principal marketing
activities are expected to be conducted or controlled by licensees of the
Company's technology. Accordingly, the Company's future success will depend to
a significant extent on the commitment of Company licensees to the Company's
technology and products. If the Company licenses its technology and products,
it may also not have control over the manufacturing process, quality assurance
or costs. Although the Company's licensing strategy is based partially on the
Company's assessment that licensees may be more effective than the Company in
penetrating certain markets and obtaining greater market share, there can be no
assurance that this will be the case. Accordingly, revenues which may be
derived by the Company under license arrangements may be less than from sales
which might have been derived by the Company if the Company were marketing its
products directly. In addition, Entergy Enterprises is entitled to receive or
participate in certain license and sublicense fees derived by the Company.
Further, because the Company believes that the success of a telecommunications
technology such as the Company's depends on rapid and widespread market
penetration, the inability of licensees to achieve such penetration will
materially adversely affect the Company's business and prospects. In certain
markets, marketing efforts (including marketing to potential licensees) are or
may in the future be conducted by independent distributors and OEMs who may also
represent entities that are more significant to the distributor's business than
is the Company and who may have no contractual obligation to market the
Company's technology or products.
DEPENDENCE ON PATENTS AND OTHER PROPRIETARY RIGHTS. The Company has twelve
issued United States patents, six issued foreign patents and two additional
United States patent applications pending, all generally covering the Company's
core technology. In addition, more than 20 corresponding patent applications
are pending in various foreign countries. The Company believes these patents
have been and will continue to be important in enabling the Company to compete
in the telecommunications industry. However, there can be no assurance that the
Company's patents will not be challenged or circumvented by competitors or will
provide the Company with any competitive advantages or that other companies will
not be able to market functionally similar products, systems or processes
without violating the Company's patent rights or that any additional patents
will be issued. Failure to obtain patent protection in certain foreign
countries may have a material adverse affect on the Company's ability to compete
effectively in those countries. The Company also relies on trade secrets that
it seeks to protect, in part, through confidentiality agreements with employees
and other parties. There can be no assurance that these agreements will not be
breached, that the Company will have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known to or independently
developed by competitors. As the Company intends to enforce its patents,
trademarks and copyrights and protect its trade secrets, it may be involved from
time to time in litigation to determine the enforceability, scope and validity
of
9
<PAGE>
these rights. Any such litigation could result in substantial cost to the
Company and diversion of effort by the Company's management and other personnel.
GOVERNMENT REGULATION. The Company's markets in the United States may be
materially affected by regulations and actions of the Federal Communications
Commission ("FCC"), state public service and utility commissions, the United
States Congress, and the courts relating to regulatory barriers between the
telephone service and cable television industries, rate restrictions for
services provided by companies in such industries, or other factors which affect
the market and demand for and availability of communication systems providing a
combination of telephone, computer, and video services. In certain United
States markets, regulatory barriers restrict the ability of some service
providers to provide a full range of communications services. Although
legislation has been proposed to change the current regulations for those who
provide both telephone and video services, there can be no assurance that such
legislation will be implemented or, if implemented, when such changes will
become effective. These restrictions may be an important factor in decisions by
domestic telephone companies or cable operators in purchasing Company products
or licensing Company technology. A decision by a utility to deploy an energy
management system using PowerView-TM- for use in its existing service territory
for energy applications will depend in part on the evaluation and approval of
public utility commissions. There can be no assurance that public utility
commissions will permit utilities to recover the full costs of PowerView in
their customer rate bases.
RISKS RELATING TO FIELD AND PILOT TESTING. Telecommunications technologies
such as the Company's are generally first evaluated through a lengthy process of
testing, field trials and first deployments prior to any commercial deployments.
As a result, the Company has expended and may continue to expend substantial
sums on product development and modifications and for inventory to support field
trials which may not result in any commercial deployments. The Company's
technology and products have been tested in certain field trials which have not
yet resulted in significant purchases of Company products. Field trials are
ongoing and the Company is unable to predict whether or when any commercial
deployments will result, as this may depend on numerous factors beyond the
Company's control, such as regulatory constraints, priorities and limitations on
capital expenditures of the customer.
VOLATILITY OF STOCK PRICE. The trading price of the Company's Common Stock
has been highly volatile and could continue to be subject to significant
fluctuations in response to variations in the Company's quarterly operating
results, general trends in the industry and other factors. The market prices of
stocks of high technology companies often fluctuate based on factors unrelated
to the operating performance of specific companies. Announcements by potential
customers of their plans with respect to field trials or deployment orders for
products of the Company or of competitors of the Company could cause the market
price of the Common Stock to fluctuate substantially. Announcements of
regulatory changes, or the failure to make changes which are anticipated by the
telecommunications industry or the public, may create public perception that the
business prospects of the Company may be adversely affected. Such a perception,
whether or not accurate, may adversely affect the market price of the Common
Stock.
DEPENDENCY ON HARDWARE SUPPLIERS. The Company's PowerView-Registered
Trademark- system is integrated with hardware and software components that
comprise the in-home network. The Company has completed integration of its
current version of PowerView-Registered Trademark- in cooperation with two
hardware suppliers. The Company is currently dependent upon these suppliers for
its continued involvement in certain field trials of PowerView-Registered
Trademark- as well as potential near-term sales activities. Should these
suppliers be unable to supply or discontinue production, the Company could
experience significant delays and costs as a result of identifying and
integrating the PowerView-Registered Trademark- product with a replacement
supplier. Although the Company is investigating and evaluating additional
sources there can be no assurance that such activities will occur or, in a
timely enough fashion to avoid delays and incurring significant additional
integration costs.
FLUCTUATION IN REVENUES. The Company's strategy includes licensing
arrangements, which are expected to include a license fee. During the period in
which license fees are derived and retained by the Company, these fees can
represent a substantial portion of the Company's revenues. Because of the
extensive period of time involved in negotiating and obtaining a licensing
arrangement as well as the inability to predict whether or when any licenses
will be entered into, the Company may experience significant fluctuations in
revenues (or periods in
10
<PAGE>
which minimal or no revenues are recognized) and operating results, at least
over the near term. In addition, Entergy Enterprises has the right to receive
or participate in certain license or sublicense fees derived by the Company.
Additional variability in revenues and operating results may arise from timing
and extent of field trials, budgeting and purchasing patterns of customers,
regulation of cable television operators and telephone companies and
technological developments in the telecommunications industry, as well as
general economic trends. Notwithstanding the lack of revenues in certain
periods, the Company continues to incur significant expenses and, accordingly,
substantial net losses and cash flow shortfalls from operations. The continued
inability of the Company to generate revenues on a predictable basis could
result in the interruption or cancellation of certain of the Company's research
and product development efforts, and require the Company to obtain additional
funds.
DEPENDENCE UPON KEY PERSONNEL. Because of the specialized technical nature
of the Company's business the Company's success will depend to a significant
extent upon a number of key technical and management employees. While the
Company employees are required to sign standard agreements concerning
confidentiality and ownership of inventions, the employees are generally not
otherwise subject to employment agreements. The loss of the services of any of
the Company's key employees could have a material adverse effect on the
Company's business, financial condition or results of operations. The Company
does not maintain life insurance policies on its key employees.
NO ASSURANCE OF ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL. The Company's
ability to maintain its competitive technological position will depend, in part,
upon its ability to attract and retain highly qualified scientific, managerial
and manufacturing personnel. Competition for such personnel is intense. The
loss of a significant group of key employees would adversely affect the
Company's product development effort.
OBLIGATIONS DUE ENTERGY ENTERPRISES. Pursuant to an Amended Product
License Agreement (the "License Agreement") with Entergy Enterprises, Inc.
(Entergy) the Company is obligated to pay Entergy $3,500,000 in March 1998 and
$3,500,000 in March 1999. The amounts due Entergy will be reduced by any
royalty payments paid to Entergy in connection with the License Agreement prior
to their payment. There can be no assurance that the Company will have
generated sufficient cash flow from its operating activities to meet this
obligation and as a result may be required to seek external debt or equity
financing at that time.
ANTI-TAKEOVER PROVISIONS. The Company is subject to agreements and
provisions which could hinder or preclude an unsolicited acquisition of the
Company. The Company has an employment agreement with one of its executive
officers and severance agreements with five of its other officers and employees.
The employment agreement which expires in June 1997, provides for the executive
to be paid the remainder of his contract if it is terminated upon a change of
control. The severance agreements generally provide for six months salary in
the event the officer/employee is terminated without cause. Additional payments
would be due in the event new employment is not secured within a twelve month
period. In addition, the Company's Restated Certificate of Incorporation
authorizes the Board of Directors to issue, without stockholder authorization,
shares of preferred stock, in one or more designated series or classes. The
Restated Certificate of Incorporation and By-laws also provide for the Board of
Directors to be divided into three classes which serve for staggered three-year
terms. The Company is also subject to a Delaware statute regulating business
combinations. In addition the Company has adopted a preferred stock purchase
plan. Any of these agreements or provisions could discourage, hinder or
preclude an unsolicited acquisition of the Company and could make it less likely
that stockholders receive a premium for their shares as a result of any such
attempt. These provisions may also have a depressive effect on the market price
of the Common Stock.
11
<PAGE>
SELLING STOCKHOLDERS
The Selling Stockholders who may acquire their shares of Common Stock
pursuant to exercise of the Underwriter Warrants and Additional Underwriter
Warrants acquired such warrants in connection with the Company's initial public
offering in July 1992, or private placements of the Company's securities prior
to July 1992. (See "Risk Factors - Need for Additional Funds and No Assurance
of Available Financing").
The Selling Stockholders who may acquire their shares of Common Stock
pursuant to exercise of the Series E Warrants and Series F Warrants acquired
such warrants in connection with an agreement involving registration of Series E
Preferred Shares and as finder compensation in connection with the Series F
Preferred shares, respectively, in August 1996. (See "Risk Factors - Need for
Additional Funds and No Assurance of Available Financing").
The following table lists the Selling Stockholders, the number of shares of
the Company's Common Stock which each owned or had the right to acquire upon the
exercise of warrants acquired by or assigned to each, the number of Shares
expected to be sold by each, assuming the exercise of all warrants and the
number and the percentage of the shares of the Company's Common Stock which each
will own or have the right to acquire after the offering pursuant to the
Registration Statement, assuming the sale of all the Shares expected to be sold.
Shares Owned Shares Owned Percentage
Selling Before Shares To After Owned After
Stockholder (1) Offering Be Offered Offering Offering (17)
- --------------- -------- ---------- -------- -------------
Daniel Purjes(2) 958,606 958,606 -0- --
Peter Sheib(3) 231,736 221,639 10,097 (16)
Averell Satloff(4) 212,389 208,089 4,300 (16)
Lawrence Rice(5) 97,235 97,211 24 (16)
Matthew Balk(6) 75,872 75,775 97 (16)
Charles Roden(7) 70,636 70,598 38 (16)
Michael Loew(8) 40,445 40,412 33 (16)
Don Michlin(9) 17,609 17,609 -0- --
Frank Garriton(10) 3,522 3,522 -0- --
Paul H. Fitzgerald(11) 1,613 1,589 24 (16)
Jeff L. Sadler(12) 17,609 17,609 -0- --
Sharon Bierman(13) 70,433 70,433 -0- --
State Capital Market
Group, Ltd.(14) 100,000 100,000 -0- --
Newsun Limited(15) 867,000 50,000 817,000 1.9%
- ---------------
(1) The persons named in the table have sole voting and investment power with
respect to all shares of FPN Common Stock shown as beneficially owned by
them, subject to community property laws, where applicable.
(2) Includes (i) 933,020 shares which represents 120% of the shares issuable
upon exercise of Underwriter Warrants at October 30, 1996; and (ii)
25,586 shares issuable upon exercise of Additional Underwriter Warrants.
(3) Includes (i) 214,585 shares which represents 120% of the shares issuable
upon exercise of Underwriter Warrants at October 30, 1996 (ii) 7,054 shares
issuable upon exercise of Additional Underwriter Warrants; and (iii) 10,097
shares currently held by the Selling Stockholder . Excludes 12,500 shares
held by KDE Financial Services of which Mr. Sheib is a 50% owner.
12
<PAGE>
(4) Includes (i) 194,660 shares which represents 120% of the shares issuable
upon exercise of Underwriter Warrants at October 30, 1996; (ii)13,429
shares issuable upon exercise of Additional Underwriter Warrants; and (iii)
4,300 shares currently held by the Selling Stockholder.
(5) Includes (I) 93,642 shares which represents 120% of the shares issuable
upon exercise of Underwriter Warrants at October 30, 1996; (ii) 3,569
shares issuable upon exercise of Additional Underwriter Warrants; and (iii)
24 shares currently held by the Selling Stockholder.
(6) Includes (I) 72,380 shares which represents 120% of the shares issuable
upon exercise of Underwriter Warrants at October 30, 1996; (ii) 3,395
shares issuable upon exercise of Additional Underwriter Warrants; and (iii)
97 shares currently held by the Selling Stockholder.
(7) Includes (I) 68,207 shares which represents 120% of the shares issuable
upon exercise of Underwriter Warrants at October 30, 1996; (ii) 2,391
shares issuable upon exercise of Additional Underwriter Warrants; and (iii)
38 shares currently held by the Selling Stockholder.
(8) Includes (I) 38,471 shares which represents 120% of the shares issuable
upon exercise of Underwriter Warrants at October 30, 1996; (ii) 1,941
shares issuable upon exercise of Additional Underwriter Warrants; and (iii)
33 shares currently held by the Selling Stockholder.
(9) Represents 120% of the shares issuable upon exercise of Underwriter
Warrants at October 30, 1996.
(10) Represents 120% of the shares issuable upon exercise of Underwriter
Warrants at October 30, 1996.
(11) Includes (I) 1,480 shares which represents 120% of the shares issuable upon
exercise of Underwriter Warrants at October 30, 1996; (ii) 109 shares
issuable upon exercise of Additional Underwriter Warrants; and (iii) 24
shares currently held by the Selling Stockholder.
(12) Represents 120% of the shares issuable upon exercise of Underwriter
Warrants at October 30, 1996.
(13) Represents 120% of the shares issuable upon exercise of Underwriter
Warrants at October 30, 1996.
(14) Represents shares issuable upon exercise of the Series F Warrants (See
"Risk Factors - Need for Additional Funds and No Assurances of Available
Financing".).
(15) Represents (i) 50,000 shares issuable upon exercise of the Series E
Warrants and (ii) 817,000 shares acquired through conversion of Series E
Preferred Shares. Excludes 1,750 of outstanding Series E Preferred Stock
which at October 30, 1996 is convertible into 3,500,000 shares of the
Company's Common Stock. (See "Risk Factors - Need for Additional Funds and
No Assurance of Available Financing".)
(16) Ownership is less than 1%
(17) Shares of Common Stock outstanding at October 30, 1996 was 39,912,581
shares.
13
<PAGE>
PLAN OF DISTRIBUTION
The Company has been advised by the Selling Stockholders that they, or
their respective pledges, donees, transferees or successors in interest, intend
to sell all or a portion of the Shares from time to time on the Nasdaq SmallCap
Market at prices and at terms prevailing at the time of sale or at prices
related to the then current market price, or in negotiated transactions. The
Shares may be sold by one or more of the following methods: (a) a block trade
in which the broker or dealer so engaged will attempt to sell the Shares as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker or dealer as principal and
resale by such broker or dealer for its own account pursuant to this Prospectus;
(c) an over-the-counter distribution in accordance with the rules of the Nasdaq
SmallCap Market; (d) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; and (e) in privately negotiated transactions.
There is no assurance that any of the Selling Stockholders will sell any or
all of the Shares offered by them. Pursuant to the terms of the Underwriter
Warrants, which are currently exercisable, the Underwriter Warrants are subject
to both share and price adjustments in the event of issuance of Common Stock or
securities convertible into Common Stock subsequent to the Underwriter Warrants
original issuance, in July 1992. The Underwriter Warrants expire in July 1997,
if unexercised. Therefore, the number of shares of Common Stock into which the
Underwriter Warrants are exercisable and which may be sold by the Selling
Stockholders at a particular time could vary in accordance with the above
described contractual provisions of the Underwriter Warrants. See "Risk Factors
- -- Need for Additional Funds and No Assurance of Available Financing." The
Additional Underwriter Warrants are immediately exercisable and expire in
February 1997 if unexercised. Further, the Series E Warrants and Series F
Warrants are immediately exercisable and expire in August 1999.
In effecting sales, brokers or dealers engaged by the Selling Stockholders
may arrange for other brokers or dealers to participate. Brokers or dealers
will receive commissions or discounts from the Selling Stockholders in amounts
to be negotiated prior to the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. The Company will
pay all expenses incident to the offering and sale of the Shares to the public,
including without limitation, registration, filing and qualification fees,
printers' and accounting fees and fees and disbursements of counsel of the
Company. All discounts or commissions will be borne by the Selling
Stockholders.
The Company has agreed to indemnify in certain circumstances the Selling
Stockholders against certain liabilities, including certain liabilities under
the Securities Act. The Selling Stockholders have agreed to indemnify in
certain circumstances the Company and certain related persons against certain
liabilities, including liabilities under the Securities Act.
The Company has agreed with the Selling Stockholders to keep the
Registration Statement of which this Prospectus constitutes a part effective for
twelve months. The Company intends to de-register any of the Shares not sold by
the Selling Stockholders at the end of such twelve month period.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders.
LEGAL MATTERS
The legality of the Shares is being passed upon by Gray Cary Ware &
Freidenrich, A Professional Corporation, Palo Alto, California.
14
<PAGE>
EXPERTS
The consolidated balance sheets as of March 31, 1996 and 1995 and the
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended March 31, 1996 incorporated by
reference in this Prospectus have been incorporated in reliance on the report
(which contains an explanatory paragraph relating to the Company's ability to
continue as a going concern as described in Note 2 of Notes to Consolidated
Financial Statements) of Coopers & Lybrand L.L.P, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
15
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES,
OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, IN ANY JURISDICTION
IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
PAGE
----
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Incorporation of Certain Documents by Reference. . . . . . . . . . . . . . . 3
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1,933,092 SHARES
FIRST PACIFIC NETWORKS, INC.
COMMON STOCK
----------
PROSPECTUS
----------
October______ , 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses in connection
with the sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fees and Nasdaq
filing fee.
SEC Registration Fee. . . . . . . . . . . . . . . . . . . . $ 407
Nasdaq filing fee . . . . . . . . . . . . . . . . . . . . . -
------
Accounting fees and expenses. . . . . . . . . . . . . . . . 2,000
------
Printing. . . . . . . . . . . . . . . . . . . . . . . . . . -
------
Transfer agent and registrar fees and expenses. . . . . . . -
------
Blue Sky fees and expenses (including counsel fees) . . . . -
------
Legal fees and expenses . . . . . . . . . . . . . . . . . . 5,000
------
Miscellaneous expenses. . . . . . . . . . . . . . . . . . . 1,000
------
Total . . . . . . . . . . . . . . . . . . . . . . . $8,407
------
------
The Company will pay all expenses of registration, issuance and
distribution of the shares being sold by the Selling Stockholders, excluding
underwriting discounts and commissions and legal fees.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation and By-Laws of the Company provide that
the Company shall indemnify any person to the full extent permitted by the
Delaware General Corporate Law (the "GCL"). Section 145 of the GCL, relating to
indemnification, is hereby incorporated herein by reference.
In accordance with Section 102(a)(7) of the GCL, the Certificate of
Incorporation of the Company eliminates the personal liability of directors to
the Company or its shareholders for monetary damages for breach of fiduciary
duty as a director with certain limited exceptions set forth in Section
102(a)(7).
The Registrant has also entered into indemnification agreements with each
of its executive officers and directors, as well as several of its officers, the
form of which is filed as Exhibit 10.1 and reference is hereby made to such
form.
<PAGE>
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
4.1 Form of Common Stock Purchase Warrant dated January 10, 1992 issued by
the Company to Josepthal Lyon & Ross Incorporated (the Additional
Underwriter Warrants) (1)
4.2 Warrant Agreement between the Company and Josepthal Lyon & Ross
Incorporated (2)
4.3 Form of letter of agreement between holders of Underwriter Warrants
and First Pacific Networks, Inc.(3)
4.4 Form of Indemnification Agreement (4)
4.5 Warrant Agreement between the Company and Michael Arnouse (3)
4.6 Warrant Agreement between the Company and Newsun Limited (3)
5.1 Opinion of Gray Cary Ware & Freidenrich, A Professional Corporation
(3)
23.1 Consent of Coopers & Lybrand L.L.P., independent accountants (3)
23.2 Consent of Gray Cary Ware & Freidenrich, A Professional Corporation
(included in Exhibit 5.1)
24.1 Power of Attorney (included in the Signature Page contained in Part II
of the Registration Statement).
- --------------
(1) Filed as Exhibit 10.26 to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996.
(2) Filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996.
(3) Filed herewith.
(4) Filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996 and incorporated herein by
reference.
ITEM 17. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the
<PAGE>
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
D. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
E. The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
<PAGE>
contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of the registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Jose, State of
California on the 30th day of October 1996.
First Pacific Networks, Inc.
By: /s/ M. Peter Thomas
-------------------------------------
M. Peter Thomas
President and Chief Executive Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of First Pacific Networks, Inc.,
hereby severally constitute and appoint M. Peter Thomas and Kenneth W.
Schneider, and each of them singly, our true and lawful attorneys with full
power to them, and each of them singly, to sign for us and in our names in the
capacities indicated below, the Registration Statement on Form S-3 filed
herewith and any and all pre-effective and post-effective amendments to said
Registration Statement, and generally to do all such things in our names and
behalf in our capacities as officers and directors to enable First Pacific
Networks, Inc. to comply with the provisions of the Securities Act and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys, or any of
them, to said Registration Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on October 30, 1996 by the
following persons in the capacities indicated.
SIGNATURE TITLE
/s/ M. Peter Thomas PRESIDENT, CHIEF EXECUTIVE OFFICER AND
- ------------------------------------ DIRECTOR (PRINCIPAL EXECUTIVE OFFICER)
M. Peter Thomas
/s/ Kenneth W. Schneider EXECUTIVE VICE PRESIDENT FINANCE;
- ------------------------------------ CHIEF FINANCIAL OFFICER; CORPORATE
Kenneth W. Schneider SECRETARY (PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
/s/ Paul C. O'Brien CHAIRMAN OF THE BOARD OF DIRECTORS
- ------------------------------------
Paul C. O'Brien
/s/ Robert P. McNamara, Ph.D. CHIEF TECHNICAL OFFICER; DIRECTOR
- ------------------------------------
Robert P. McNamara, Ph.D.
/s/ Ambassador William A. Wilson DIRECTOR
- ------------------------------------
Ambassador William A. Wilson
/s/ Dr. Bill B. May DIRECTOR
- ------------------------------------
Dr. Bill B. May
<PAGE>
INDEX TO EXHIBITS
Exhibit No.
- -----------
4.1 Form of Common Stock Purchase Warrant dated January 10, 1992 issued by the
Company to Josepthal Lyon & Ross Incorporated (the Additional Underwriter
Warrants) (1)
4.2 Warrant Agreement between the Company and Josepthal Lyon & Ross
Incorporated (2)
4.3 Form of letter of agreement between holders of Underwriter Warrants and
First Pacific Networks, Inc.(3)
4.4 Form of Indemnification Agreement (4)
4.5 Warrant Agreement between the Company and Michael Arnouse (3)
4.6 Warrant Agreement between the Company and Newsun Limited (3)
5.1 Opinion of Gray Cary Ware & Freidenrich, A Professional Corporation (3)
23.1 Consent of Coopers & Lybrand L.L.P., independent accountants (3)
23.2 Consent of Gray Cary Ware & Freidenrich, A Professional Corporation
(included in Exhibit 5.1)
24.1 Power of Attorney (included in the Signature Page contained in Part II of
the Registration Statement).
- ---------------
(1) Filed as Exhibit 10.26 to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996.
(2) Filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996.
(3) Filed herewith.
(4) Filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996 and incorporated herein by reference.
<PAGE>
EXHIBIT 4.3
October 9, 1996
To Certain Holder of Warrants to Purchase
Common Stock of First Pacific Networks, Inc.
In response to my letter of August 29, 1996, you previously indicated your
intention to exercise your right to require the inclusion of shares (the
"Registrable Shares") of Common Stock of First Pacific Networks, Inc., a
Delaware corporation (the "Company") issuable upon exercise of warrants to
purchase the Company's Common Stock held by you in a registration statement on
Form S-3 (the "Series E and F Registration Statement") filed by the Company with
the Securities and Exchange Commission (the "SEC") in connection with the
registration of shares of Common Stock issuable upon conversion of shares of the
Company' Series E and F Preferred Stock. Pursuant to the terms of the Company's
agreement with the holders of the Series E and F Preferred Stock, the Company
will maintain the effectiveness of the Series E and F Registration Statement for
a period of six months after the date of effectiveness of the registration
statement.
The Company has recently closed the sale of shares of the Company's Series
G Preferred Stock. Pursuant to its agreement with the purchasers of the Series
G Preferred Stock, the Company has agreed to file a second registration
statement on Form S-3 (the "Series G Registration Statement") with the SEC in
connection with the registration of the shares of Common Stock issuable upon
conversion of the Series G Preferred Stock and to maintain the effectiveness of
the Series G Registration Statement for a period of one year from the date of
effectiveness. Pursuant to the terms of the Company's agreement with you, you
are entitled to require inclusion of the Registrable Shares in the Series G
Registration Statement.
In order to avoid confusion and assure that you obtain the benefits for the
Registrable Shares of the longer period of effectiveness to be sought for the
Series G Registration Statement, the Company proposes (i) to file a separate
registration statement on Form S-3 (the "Registrable Shares Registration
Statement") with respect to the registration of the Registrable Shares in lieu
of inclusion of the Registrable Shares in Series E and F Registration Statement
or Series G Registration Statement and to maintain such registration as
effective during the same one year period and on the same terms as the Series G
Registration Statement and (ii) that, on the condition of (a) the filing of the
Registrable Shares Registration Statement concurrent with the filing of the
Series G Registration Statement which shall be no later than October 31, 1996,
and (b) the Company using its best efforts to have the Registrable Shares
Registration Statement declared effective as promptly as possible, you waive the
rights to inclusion of the Registrable Shares in the Series E and F and Series G
Registration Statements. If you agree to the filing of the Registrable Shares
Registration Statement and the waiver of the inclusion of the Registrable Shares
in the Series E and F and Series G Registration Statements, please sign and date
in the places indicated below the enclosed copy of this letter and return it to
me.
Except as expressly modified hereby, the Warrant Agreement dated as of
July 22, 1992 shall remain unmodified and in full force and effect.
<PAGE>
Holder of Warrants to Purchase
October 9, 1996
Page Two
If you have any questions, please do not hesitate to give me a call at
(408) 943-7642.
Very truly yours,
First Pacific Networks, Inc.
----------------------------
Agreed and accepted:
- --------------------
- --------------------
Date:
---------------
<PAGE>
EXHIBIT 4.5
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Company: First Pacific Networks, Inc., a Delaware corporation
Number of Shares: 100,000 shares
-------
Class of Stock: Common Stock
Initial Exercise Price: $1.52 per share
-----
Issue Date: as of 8/27/1996
---------
Expiration Date: 8/26/1999
---------
Becomes Exercisable: Immediate
---------
THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00 and
for other good and valuable consideration, STATE CAPITAL MARKET GROUP, LTD.
("Holder") is entitled to purchase the number of fully paid and nonassessable
shares of the class of securities (the "Shares") of First Pacific Networks,
Inc., a Delaware corporation (the "Company") at the Initial Exercise Price per
Share all as set forth above and as adjusted pursuant to Article 2 of this
Warrant (the "Warrant Price"), subject to the provisions and upon the terms
and conditions set forth in this Warrant.
I. EXERCISE AND CONVERSION RIGHT
1. EXERCISE. Holder may exercise this Warrant, in whole or in part, by
delivering this Warrant and a duly executed Notice of Exercise/Conversion in
substantially the form attached as Appendix 1 (the "Notice of
Exercise/Conversion") to the principal office of the Company. Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
2. CONVERSION RIGHT. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may at its option convert this Warrant, in whole or in part,
into a number of Shares determined by dividing (a) the aggregate fair market
value of the Shares or other securities otherwise issuable upon exercise of this
Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market
value of one Share by delivering the Warrant and a duly executed Notice of
Exercise/Conversion. The fair market value of the Shares shall be determined
pursuant to Section 1.3.
3. FAIR MARKET VALUE. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares
reported for the business day immediately before Holder delivers its Notice of
Exercise/Conversion to the Company. If the Shares are not traded in a public
market, the Board of Directors of the Company shall determine fair market value
in its reasonable good faith judgment. The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a reputable
investment banking firm to undertake such valuation. If the valuation of such
investment banking firm is greater than that determined by the Board of
Directors, then all fees and expenses of such investment banking firm shall be
paid by the Company. In all other circumstances, such fees and expenses shall
be paid by Holder.
4. DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired, and, if this
<PAGE>
Warrant has not been fully exercised or converted and has not expired, a new
Warrant representing the Shares not so acquired.
<PAGE>
5. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
6. SALE, MERGER, OR CONSOLIDATION OF THE COMPANY.
1) "ACQUISITION". For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of the
assets (including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
2) ASSUMPTION OF WARRANT. If, upon the closing of any Acquisition
the successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of this Warrant as if such Shares
were outstanding on the record date for the Acquisition and subsequent closing.
The Warrant Price shall be adjusted accordingly.
3) NON-ASSUMPTION. If upon the closing of any Acquisition the
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised or converted this Warrant then this Warrant shall be
deemed to have been automatically converted pursuant to Section 1.2 and
thereafter Holder shall participate in the Acquisition on the same terms as
other holders of the same class of securities of the Company.
II. ADJUSTMENTS TO THE SHARES
1. STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a
dividend on its common stock payable in common stock, or other securities,
subdivides the outstanding common stock into a greater amount of common stock,
then upon exercise of this Warrant, for each Share acquired, Holder shall
receive, without cost to Holder, the total number and kind of securities to
which Holder would have been entitled had Holder owned the Shares of record as
of the date the dividend or subdivision occurred.
2. RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise of
this Warrant, Holder shall be entitled to receive, upon exercise of this
Warrant, the number and kind of securities and property that Holder would have
received for the Shares if this Warrant had been exercised immediately before
such reclassification, exchange, substitution, or other event. The provisions
of this Section 2.2 shall similarly apply to successive reclassifications,
exchanges, substitutions, or other events.
3. ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
4. NO IMPAIRMENT. The Company shall not, by amendment of its Certificate
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the
<PAGE>
Company takes any action affecting the Shares or its common stock other than as
described above that adversely affects Holder's rights under this Warrant, the
Warrant Price shall be adjusted downward and the number of Shares issuable upon
exercise of this Warrant shall be adjusted upward in such a manner that the
aggregate Warrant Price of this Warrant is unchanged.
<PAGE>
III. REPRESENTATIONS
1. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Holder that all Shares which may be issued upon the exercise of
the purchase right represented by this Warrant or upon conversion of this
Warrant, upon issuance, will be duly authorized, validly issued, fully paid and
nonassessable, and free of any liens and encumbrances except for restrictions on
transfer provided for herein or under applicable federal and state securities
laws.
IV. MISCELLANEOUS
1. TERM. This Warrant is exercisable or convertible, in whole or in
part, at any time on or before the Expiration Date set forth above.
2. LEGENDS. This Warrant and the Shares shall be imprinted with a legend
in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
3. COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the
Shares issuable upon exercise this Warrant may not be transferred or assigned in
whole or in part without compliance with applicable federal and state securities
laws by the transferor and the transferee (including, without limitation, the
delivery of investment representation letters and legal opinions reasonably
satisfactory to the Company, as reasonably requested by the Company).
4. TRANSFER PROCEDURE. Subject to the provisions of Section 4.2, Holder
may transfer, to any person owning all or substantially all of Holder's assets
or capital stock, all or part of this Warrant or the Shares issuable upon
exercise of this Warrant by giving the Company notice of the portion of the
Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, as amended, the Company shall have the right to
refuse to transfer any portion of this Warrant to any person who directly
competes with the Company.
5. REGISTRATION RIGHTS. The Shares shall have the registration rights
set forth on Exhibit A.
6. NOTICES. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time.
7. WAIVER. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
<PAGE>
8. ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
9. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to its
principles regarding conflicts of law.
FIRST PACIFIC NETWORKS, INC.
By /s/ M. Peter Thomas
----------------------------------
M. Peter Thomas, President
By /s/ Kenneth W. Schneider
----------------------------------
Kenneth W. Schneider, Secretary
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE/CONVERSION
1. The undersigned hereby elects to purchase ____________ shares of
Common Stock of FIRST PACIFIC NETWORKS, INC. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of such
Shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares in the manner specified in the Warrant. This conversion is made as to
_________ Shares of the Common Stock covered by the Warrant.
[Strike paragraph 1 that does not apply.]
2. Please issue a certificate of certificates representing said Shares in
the name of the undersigned or in such other name as is specified below.
-------------------------
(Name)
-------------------------
-------------------------
(Address)
3. The undersigned represents the undersigned is acquiring the Shares
solely for its own account and not as a nominee for any other party and not with
a view toward the resale or distribution thereof except in compliance with
applicable securities laws.
------------------------------------
(Signature)
------------------------------------
(Date)
<PAGE>
Addendum A
IRREVOCABLE STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign, and transfer
unto _______________________________________ ________________________
(name of transferee) (no. of shares)
shares of the Common Stock of First Pacific Networks, Inc. represented by
Certificate(s) No.(s). _____________________ (inclusive), and does hereby
appoint ___________________ attorney to transfer the foregoing on the books of
First Pacific Networks, Inc., with full power of substitution in the premises.
Dated ______________, 199__
------------------------------------
(Signature)
------------------------------------
Typed Name
THE SIGNATURE(S) ON THIS STOCK POWER MUST CORRESPOND WITH THE NAME(S) ON THE
FACE OF THE CERTIFICATE(S) IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT. TRUSTEES, OFFICERS AND OTHER FIDUCIARIES OR AGENTS SHOULD INDICATE
THEIR TITLES OR CAPACITIES.
<PAGE>
ADDENDUM B
SELLER'S REPRESENTATION LETTER
In connection with the sale of ________ shares (the "Shares") of Common
Stock of First Pacific Networks, Inc. (the "Company") by the undersigned (the
"Seller"), on ____________, 199__ (the "Sale Date"), the Seller hereby
represents and warrants to the Company and its transfer agent as follows:
1. The Shares were sold by the Seller on the Sale Date.
2. The Seller has fully complied with the provisions of Sections 3 and 4
of Exhibit A to the Warrant to Purchase Stock dated as of __________, 1996 of
the Company to the undersigned (the "Warrant).
3. The Shares were issued to the Seller by the Company on ,
1996 upon exercise or conversion of the Warrant; and
4. The Seller has caused the Prospectus (as defined in Exhibit A of the
Warrant) to be furnished to the purchase of the Shares and to the broker-dealer,
if any, through whom the sale of the Shares was made.
Executed this day of _______________, 199__.
------------------------------------
Signature
------------------------------------
Name
------------------------------------
------------------------------------
------------------------------------
Address
<PAGE>
Exhibit A
Registration Rights
1. Prior to the expiration date of this Warrant the Company will use its
best efforts to effect the registration under the Securities Act of 1933, as
amended (the "Act") and the rules and regulations of the Securities and Exchange
Commission (the "Commission") of the resale of the Shares and, in connection
therewith, it will:
(a) prepare and file a registration statement on Form S-3 (the
"Registration Statement") with respect to the Shares, pursuant to the
rules and regulations of the Commission and use its best efforts to
cause the Registration Statement to become and remain effective for a
period of not less than the earliest date (the "Termination Date") of
(i) the date one year after the date of effectiveness of the
Registration Statement, (ii) the date the Holder may sell all of the
Shares issuable upon conversion of the Warrant on reliance upon Rule
144 under the Act, and (iii) the date the holder no longer owns the
Warrant and/or any of the Shares issued to Holder upon exercise or
conversion of the Warrant;
(b) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the Prospectus (as
defined in Section 4(b) below) as may be necessary to keep the
Registration Statement effective until the Termination Date and comply
with the applicable provisions of the rules and regulations of the
Commission; and
(c) furnish to Holder the number of copies of the Prospectus the
Holder may reasonably request.
Notwithstanding any other provision of this Exhibit A, the Company shall have
the right at any time to require that to Holder to suspend further open market
offers and sales of the Shares whenever, and for so long as, in the reasonable
judgment of the Company after consultation with counsel there is or maybe in
existence material undisclosed information or events with respect to the Company
(the "Suspension Right"). In the event the Company exercises the Suspension
Right, such suspension will continue for the period of time reasonably necessary
for disclosure to occur at a time that is not detrimental to the Company and its
stockholders or until such time as the information or event is no longer
material, each as determined in good faith by the Company after consultation
with counsel. The Company will promptly give the Holder notice of any such
suspension and will use all reasonable efforts to minimize the length of the
suspension.
2. The costs and expenses of registration of the shares to be borne by
the Company for purposes of this Exhibit B shall include, without limitation,
printing expenses (including a reasonable number of prospectuses for circulation
by the selling Holders), legal fees and disbursements of counsel for the
Company, "blue sky" expenses, accounting fees and filing fees, but shall not
include underwriting commissions or similar charges, legal fees and
disbursements of counsel for the Holder.
3. The Holder shall be required to submit the following documents to the
transfer agent of the Company's Common Stock when making a sale of Shares
pursuant to the Registration Statement, with copies to the Company:
(i) Original stock certificate representing the Shares sold;
(ii) Originally executed stock power in the form of ADDENDUM A
hereto, with signature guaranteed; and
<PAGE>
(iii) Originally executed Seller's Representation Letter in the form
of ADDENDUM B hereto.
4. The Holder by accepting the Warrant hereby represents to and covenants
with the Company that, until the Termination Date, the Holder will:
(a) Not engage in any stabilization activity in connection with any
of the Company's securities other than as permitted under the
Securities and Exchange Act of 1934, as amended ("Exchange Act");
(b) Cause to be furnished to any purchaser of the Shares and to the
broker-dealer, if any, through whom Shares may be offered, a copy of
the final prospectus contained in the Registration Statement, as
supplemented or amended through the date of the sale (the
"Prospectus"); and
(c) Not bid for or purchase any securities of the Company or any
rights to acquire the Company's securities, or attempt to induce any
person to purchase any of the Company's securities (except for the
Share to be sold to such person by means of the Prospectus) or any
rights to acquire the Company's securities other than as permitted
under the Exchange Act.
<PAGE>
EXHIBIT 4.6
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Company: First Pacific Networks, Inc., a Delaware corporation
Number of Shares: 50,000 shares
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Class of Stock: Common Stock
Initial Exercise Price: $1.52 per share
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Issue Date: as of 8/27/1996
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Expiration Date: 8/26/1999
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Becomes Exercisable: Immediate
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THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00 and
for other good and valuable consideration, NEWSUN LIMITED ("Holder") is entitled
to purchase the number of fully paid and nonassessable shares of the class of
securities (the "Shares") of First Pacific Networks, Inc., a Delaware
corporation (the "Company") at the Initial Exercise Price per Share all as set
forth above and as adjusted pursuant to Article 2 of this Warrant (the "Warrant
Price"), subject to the provisions and upon the terms and conditions set forth
in this Warrant.
I. EXERCISE AND CONVERSION RIGHT
1. EXERCISE. Holder may exercise this Warrant, in whole or in part, by
delivering this Warrant and a duly executed Notice of Exercise/Conversion in
substantially the form attached as Appendix 1 (the "Notice of
Exercise/Conversion") to the principal office of the Company. Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
2. CONVERSION RIGHT. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may at its option convert this Warrant, in whole or in part,
into a number of Shares determined by dividing (a) the aggregate fair market
value of the Shares or other securities otherwise issuable upon exercise of this
Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market
value of one Share by delivering the Warrant and a duly executed Notice of
Exercise/Conversion. The fair market value of the Shares shall be determined
pursuant to Section 1.3.
3. FAIR MARKET VALUE. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares
reported for the business day immediately before Holder delivers its Notice of
Exercise/Conversion to the Company. If the Shares are not traded in a public
market, the Board of Directors of the Company shall determine fair market value
in its reasonable good faith judgment. The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a reputable
investment banking firm to undertake such valuation. If the valuation of such
investment banking firm is greater than that determined by the Board of
Directors, then all fees and expenses of such investment banking firm shall be
paid by the Company. In all other circumstances, such fees and expenses shall
be paid by Holder.
4. DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired, and, if this
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Warrant has not been fully exercised or converted and has not expired, a new
Warrant representing the Shares not so acquired.
<PAGE>
5. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
6. SALE, MERGER, OR CONSOLIDATION OF THE COMPANY.
1) "ACQUISITION". For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of the
assets (including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
2) ASSUMPTION OF WARRANT. If, upon the closing of any Acquisition
the successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of this Warrant as if such Shares
were outstanding on the record date for the Acquisition and subsequent closing.
The Warrant Price shall be adjusted accordingly.
3) NON-ASSUMPTION. If upon the closing of any Acquisition the
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised or converted this Warrant then this Warrant shall be
deemed to have been automatically converted pursuant to Section 1.2 and
thereafter Holder shall participate in the Acquisition on the same terms as
other holders of the same class of securities of the Company.
II. ADJUSTMENTS TO THE SHARES
1. STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a
dividend on its common stock payable in common stock, or other securities,
subdivides the outstanding common stock into a greater amount of common stock,
then upon exercise of this Warrant, for each Share acquired, Holder shall
receive, without cost to Holder, the total number and kind of securities to
which Holder would have been entitled had Holder owned the Shares of record as
of the date the dividend or subdivision occurred.
2. RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise of
this Warrant, Holder shall be entitled to receive, upon exercise of this
Warrant, the number and kind of securities and property that Holder would have
received for the Shares if this Warrant had been exercised immediately before
such reclassification, exchange, substitution, or other event. The provisions
of this Section 2.2 shall similarly apply to successive reclassifications,
exchanges, substitutions, or other events.
3. ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
4. NO IMPAIRMENT. The Company shall not, by amendment of its Certificate
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the
<PAGE>
Company takes any action affecting the Shares or its common stock other than as
described above that adversely affects Holder's rights under this Warrant, the
Warrant Price shall be adjusted downward and the number of Shares issuable upon
exercise of this Warrant shall be adjusted upward in such a manner that the
aggregate Warrant Price of this Warrant is unchanged.
<PAGE>
III. REPRESENTATIONS
1. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Holder that all Shares which may be issued upon the exercise of
the purchase right represented by this Warrant or upon conversion of this
Warrant, upon issuance, will be duly authorized, validly issued, fully paid and
nonassessable, and free of any liens and encumbrances except for restrictions on
transfer provided for herein or under applicable federal and state securities
laws.
IV. MISCELLANEOUS
1. TERM. This Warrant is exercisable or convertible, in whole or in
part, at any time on or before the Expiration Date set forth above.
2. LEGENDS. This Warrant and the Shares shall be imprinted with a legend
in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
3. COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the
Shares issuable upon exercise this Warrant may not be transferred or assigned in
whole or in part without compliance with applicable federal and state securities
laws by the transferor and the transferee (including, without limitation, the
delivery of investment representation letters and legal opinions reasonably
satisfactory to the Company, as reasonably requested by the Company).
4. TRANSFER PROCEDURE. Subject to the provisions of Section 4.2, Holder
may transfer, to any person owning all or substantially all of Holder's assets
or capital stock, all or part of this Warrant or the Shares issuable upon
exercise of this Warrant by giving the Company notice of the portion of the
Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, as amended, the Company shall have the right to
refuse to transfer any portion of this Warrant to any person who directly
competes with the Company.
5. REGISTRATION RIGHTS. The Shares shall have the registration rights
set forth on Exhibit A.
6. NOTICES. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time.
7. WAIVER. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
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8. ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
9. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to its
principles regarding conflicts of law.
FIRST PACIFIC NETWORKS, INC.
By /s/ M. Peter Thomas
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M. Peter Thomas, President
By /s/ Kenneth W. Schneider
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Kenneth W. Schneider, Secretary
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE/CONVERSION
1. The undersigned hereby elects to purchase ____________ shares of
Common Stock of FIRST PACIFIC NETWORKS, INC. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of such
Shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares in the manner specified in the Warrant. This conversion is made as to
_________ Shares of the Common Stock covered by the Warrant.
[Strike paragraph 1 that does not apply.]
2. Please issue a certificate of certificates representing said Shares in
the name of the undersigned or in such other name as is specified below.
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(Name)
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(Address)
3. The undersigned represents the undersigned is acquiring the Shares
solely for its own account and not as a nominee for any other party and not with
a view toward the resale or distribution thereof except in compliance with
applicable securities laws.
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(Signature)
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(Date)
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Addendum A
IRREVOCABLE STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign, and transfer
unto _____________________________________ --------------------------
(name of transferee) (no. of shares)
shares of the Common Stock of First Pacific Networks, Inc. represented by
Certificate(s) No.(s). _________________________ (inclusive), and does hereby
appoint _______________________ attorney to transfer the foregoing on the books
of First Pacific Networks, Inc., with full power of substitution in the
premises.
Dated _____________, 199__
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(Signature)
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Typed Name
THE SIGNATURE(S) ON THIS STOCK POWER MUST CORRESPOND WITH THE NAME(S) ON THE
FACE OF THE CERTIFICATE(S) IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT. TRUSTEES, OFFICERS AND OTHER FIDUCIARIES OR AGENTS SHOULD INDICATE
THEIR TITLES OR CAPACITIES.
<PAGE>
ADDENDUM B
SELLER'S REPRESENTATION LETTER
In connection with the sale of ___________ shares (the "Shares") of Common
Stock of First Pacific Networks, Inc. (the "Company") by the undersigned (the
"Seller"), on _______________, 199__ (the "Sale Date"), the Seller hereby
represents and warrants to the Company and its transfer agent as follows:
1. The Shares were sold by the Seller on the Sale Date.
2. The Seller has fully complied with the provisions of Sections 3 and 4
of Exhibit A to the Warrant to Purchase Stock dated as of _______________, 1996
of the Company to the undersigned (the "Warrant).
3. The Shares were issued to the Seller by the Company on ___________,
1996 upon exercise or conversion of the Warrant; and
4. The Seller has caused the Prospectus (as defined in Exhibit A of the
Warrant) to be furnished to the purchase of the Shares and to the broker-dealer,
if any, through whom the sale of the Shares was made.
Executed this ___ day of _________, 199___.
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Signature
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Name
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Address
<PAGE>
Exhibit A
Registration Rights
1. Prior to the expiration date of this Warrant the Company will use its
best efforts to effect the registration under the Securities Act of 1933, as
amended (the "Act") and the rules and regulations of the Securities and Exchange
Commission (the "Commission") of the resale of the Shares and, in connection
therewith, it will:
(a) prepare and file a registration statement on Form S-3 (the
"Registration Statement") with respect to the Shares, pursuant to the
rules and regulations of the Commission and use its best efforts to
cause the Registration Statement to become and remain effective for a
period of not less than the earliest date (the "Termination Date") of
(i) the date one year after the date of effectiveness of the
Registration Statement, (ii) the date the Holder may sell all of the
Shares issuable upon conversion of the Warrant on reliance upon Rule
144 under the Act, and (iii) the date the holder no longer owns the
Warrant and/or any of the Shares issued to Holder upon exercise or
conversion of the Warrant;
(b) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the Prospectus (as
defined in Section 4(b) below) as may be necessary to keep the
Registration Statement effective until the Termination Date and comply
with the applicable provisions of the rules and regulations of the
Commission; and
(c) furnish to Holder the number of copies of the Prospectus the
Holder may reasonably request.
Notwithstanding any other provision of this Exhibit A, the Company shall have
the right at any time to require that to Holder to suspend further open market
offers and sales of the Shares whenever, and for so long as, in the reasonable
judgment of the Company after consultation with counsel there is or maybe in
existence material undisclosed information or events with respect to the Company
(the "Suspension Right"). In the event the Company exercises the Suspension
Right, such suspension will continue for the period of time reasonably necessary
for disclosure to occur at a time that is not detrimental to the Company and its
stockholders or until such time as the information or event is no longer
material, each as determined in good faith by the Company after consultation
with counsel. The Company will promptly give the Holder notice of any such
suspension and will use all reasonable efforts to minimize the length of the
suspension.
2. The costs and expenses of registration of the shares to be borne by
the Company for purposes of this Exhibit B shall include, without limitation,
printing expenses (including a reasonable number of prospectuses for circulation
by the selling Holders), legal fees and disbursements of counsel for the
Company, "blue sky" expenses, accounting fees and filing fees, but shall not
include underwriting commissions or similar charges, legal fees and
disbursements of counsel for the Holder.
3. The Holder shall be required to submit the following documents to the
transfer agent of the Company's Common Stock when making a sale of Shares
pursuant to the Registration Statement, with copies to the Company:
(i) Original stock certificate representing the Shares sold;
(ii) Originally executed stock power in the form of ADDENDUM A
hereto, with signature guaranteed; and
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(iii) Originally executed Seller's Representation Letter in the form
of ADDENDUM B hereto.
4. The Holder by accepting the Warrant hereby represents to and covenants
with the Company that, until the Termination Date, the Holder will:
(a) Not engage in any stabilization activity in connection with any
of the Company's securities other than as permitted under the
Securities and Exchange Act of 1934, as amended ("Exchange Act");
(b) Cause to be furnished to any purchaser of the Shares and to the
broker-dealer, if any, through whom Shares may be offered, a copy of
the final prospectus contained in the Registration Statement, as
supplemented or amended through the date of the sale (the
"Prospectus"); and
(c) Not bid for or purchase any securities of the Company or any
rights to acquire the Company's securities, or attempt to induce any
person to purchase any of the Company's securities (except for the
Share to be sold to such person by means of the Prospectus) or any
rights to acquire the Company's securities other than as permitted
under the Exchange Act.
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EXHIBIT 5.1
[LETTERHEAD]
October 31, 1996
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: FIRST PACIFIC NETWORKS, INC. REGISTRATION STATEMENT ON FORM S-3,
REGISTRATION NO. _____
Ladies and Gentlemen:
This opinion is furnished to you in connection with a Registration
Statement on Form S-3 (the "Registration Statement"), filed with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended, for the registration of 10,237,005 shares of Common Stock (the "Common
Stock"), par value $0.001 per share (the "Shares"), of First Pacific Networks,
Inc. (the "Company").
We have acted as counsel for the Company in connection with the
registration of such Shares. We have examined signed copies of the Registration
Statement and all exhibits thereto as filed with the Commission.
Based upon representations of certain officers of the Company as to the
receipt of full consideration, we are of the opinion that the shares of Common
Stock to be registered will be validly issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
/s/ Gray Cary Ware & Freidenrich
GRAY CARY WARE & FREIDENRICH
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EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
First Pacific Networks, Inc. on Form S-3 of our reports, which include an
explanatory paragraph regarding the Company's ability to contiue as a going
concern, dated May 17, 1996 (except Note 15, as to which the date is June 20,
1996), on our audits of the consolidated financial statements and financial
statement schedule of First Pacific Networks, Inc. as of March 31, 1996 and 1995
and for each of the three years in the period ended March 31, 1996, appearing in
the 1996 Annual Report on Form 10K. We also consent to the reference to our
firm under the caption "Experts."
COOPERS & LYBRAND L.L.P
San Jose, California
October 30, 1996
